Conventional loans do not require mortgage insurance if the loan to value is less than 80%-in other words, if the borrower can make a down payment of 20%. So in theory, by switching to a conventional loan, you may be able to eliminate your monthly mortgage insurance payments.
Fortunately, homeowners with existing conventional home loans can still take advantage and refinance into a new FHA home loan. Below is a short guide to help get you started and see if a FHA home loan refinance is right for you. Refinancing from Conventional Mortgages to FHA Home Loans
· Check current mortgage rates to decide between an FHA refinance and a conventional mortgage. If you’re a homeowner who’s thinking of refinancing to get lower mortgage payments or to change mortgage terms, you have a few loan options. Two common loan types are federal housing administration loans and conventional mortgages.
A conventional loan is a mortgage not insured or guaranteed by a government agency such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). As compared to FHA loans, a conventional mortgage typically requires a higher credit score. These loans will also require Private Mortgage Insurance (PMI) for loans with less than a 20% down payment.
A conventional 30 year fixed rate loan is among the most common loans for borrowers who have a higher FICO credit score and a good credit history. Conventional loans have less flexible guidelines but generally offer lower interest rates.
“The Life of Loan factor can tilt a borrower to a refinance out of FHA and into a conventional loan, even when the savings are limited and the traditional wisdom about refinancing calculations argue.
· A cash-out refinance has stricter rules in regards to refinancing with a conventional loan. You will have to own the home for at least six months before any funds can be disbursed on a new loan. In addition, if the home was for sale during the preceding six months, the maximum LTV you can get approved for is 70%.
Conventional Down Payment If your down payment is 20% or less on a multi-unit home, you have to contribute at least 5% of your own funds to your down payment. Second Homes If you’re getting a second home through a conventional loan (you can’t get them through the FHA, USDA or VA), the following guidelines apply regarding gift limits:
Loan type: Conventional 30-year fixed. The way this program works is that I analyze for each client whether or not it makes sense to refinance and determine at what rate we would need to drop from.
Jumbo Fha Loan Jumbo Loans. Loans above the maximum loan amount established by Fannie Mae and Freddie Mac are known as ‘jumbo’ loans. Because jumbo loans are bought and sold on a much smaller scale, they often have a little higher interest rate than conforming, but the.